When developers from the Related Cos. surveyed the 26 acres on the West Side of Manhattan that represent the largest undeveloped tract in New York City, they saw beyond the stored rail cars and tracks that guide trains to Hudson Yards from Penn Station. What the developers saw instead were “digerati” — the elite groups of digital wizards who populate the offices of Google and other computer firms in the neighborhood.

They saw thousands of apartments and condos, new corporate headquarters and retail shops, says Jay Cross, president of Related Hudson Yards, which is partnering with the Canadian firm Oxford Properties Group on the development.

In the pre-construction phase of the $15 billion, 15-year project, Related is demolishing the Metals Purchasing Building. Workers are removing small amounts of soil at the brownfield site, an industrial area requiring cleanup, before development can begin early in 2012.

Building platforms over the rail yards will be tricky. “Think of the trains as being in the basement of your house,” says Cross. “It's like Park Avenue, really, all the trains going north under Park Avenue are underneath all those buildings.”

It's the most ambitious project that Cross has undertaken “by a country mile,” he says, taking into account the New Meadowlands stadium, the American Airlines Arena in Miami, and other developments.

The logistics of developing the rail yard site pose a challenge for the developers, architects and engineers. “Building large-scale projects in New York is by definition complex,” notes Cross. “It's made more complex by the necessity of building over the top of an operating yard.”

The yards are a critical component for nearby Penn Station and its Long Island Railroad transportation for commuters to Manhattan. The cars speed in to the station during the morning rush hour, then spend the day at Hudson Yards before heading out for the evening departure at rush hour.

Will trains bustling under the mixed-use development mean a noisy workday for office tenants and sleepless nights for apartment dwellers? No, says Cross.

Rumbling sounds?

“We don't think that noise is really an issue at all, because the trains come into the yards empty. They come into the yards very, very slowly and they're parked all day long. It's not like being on top of a subway station where a train rumbles through every few minutes.”

The setting is ripe for development and so is the timing, according to the Related executive. New York City was spared the brunt of the recession, allowing rents to remain stable. But big projects like Battery Park City at Manhattan's southern tip, or London's Canary Wharf, ordinarily endure economic cycles because pre-development takes years.

“The city is in need of projects like this,” says Cross. “Our office stock is aging. Over 55% of our stock is over 50 years old. Other cities around the world are producing new stock faster than we are.”

Down the road, he sees healthy returns, and aims to attract corporate buyers and tenants to consolidate their headquarters.

“In the early days, we want to try to get large commercial users to come because of the extraordinary amount of infrastructure we have to put in, namely the platforms over the yards,” says Cross.

“So, what we're saying to large commercial users is that we will build the headquarters buildings for you at our cost, whether you want to lease or own,” says Cross.

Related's strategy is to offer discount deals for the offices now, and defer higher returns until the residences are built.

A grand plan, with incentives

In all, the project will encompass more than 12 million sq. ft., with approximately 5,000 apartments, 6 million sq. ft. of office space, at least one hotel, a public school, and a cultural building. The master plan also calls for 750,000 sq. ft. of retail space. The retail will take the form of a podium of four floors or higher, surrounded by three office towers.

The site can hold up to three hotels. “We've considered a five-star hotel, which would be 250 to 350 rooms. We've also considered a convention hotel, 1,000 rooms,” says Cross. Discussions are being held with potential operators.

Related's joint venture was created specifically for Hudson Yards after it won the Metropolitan Transit Authority's proposal call to develop the property. Related partnered with Goldman Sachs, and last May brought in Oxford as an investor. Oxford, a Canadian specialist in office space, helped capitalize the venture.

Subtracting the rail yards, the mixed-use model may look familiar. “It's not dissimilar to the Time Warner Center in New York, but bigger,” says Cross. Related built the Center, which opened in 2004. The development has significantly improved its neighborhood, he adds.

In a plan endorsed by New York Mayor Michael Bloomberg, the Hudson Yards apartments include at least 460 affordable units. The developer is following New York State's 80-20 ratio of market rate housing to affordable units.

When it comes to incentives, the city is doing a lot for the site. “They're building the No. 7 subway, which will come right to our front door.” The line is under construction and scheduled to open in 2014. Penn Station is a five-minute walk from the Yards. The city also is providing tax abatement incentives, such as a 40% reduction in taxes for the first 5 million sq. ft. over 20 years.

Bursting with ‘dot coms’

New York City has good reason to support the project, according to the developer. “The city realized as much as 10 years ago that bringing the subway to the West Side was going to open up those areas for both commercial and residential development. And so the city is paying for the subway, even though it's part of the MTA infrastructure.” The city also has invested in nearby streets and is building a three-block park.

The rail yards have long been a stumbling block to developing the West Side, although to the north Clinton and Hell's Kitchen are developing rapidly.

“Once we start going, then everything around us will start to go with us,” says Cross. Hudson Yards' is likely to trigger development of 40 million sq. ft. in the vicinity, he notes. “This neighborhood already is growing at twice the rate of Manhattan. It enjoys high income levels equivalent to the rest of Manhattan. It's a very happening neighborhood within the context of New York.

In particular the West Side “digerati” are a highly desirable demographic, he says. “It's a Generation X-er that is very computer literate.” The digerati are often single, with about 70% nonfamily households compared to Manhattan in general, with 50% family households.

“But they've got the same income, so you end up with a more mobile population that has slightly higher disposable income because they're not putting children through school, etc. So it's a very young crowd that is growing rapidly.”

Google has its biggest presence outside of California in the neighborhood, adds Cross. Dot com and tech companies have sprouted across the West Side, along with creative firms in the retail and fashion industries.

“This part of town is definitely going to come on strong,” says Cross. “It's just a question of how quickly.”